Professional Documents
Culture Documents
net/publication/326307550
Radical Innovation, Paradigm Shift and Incumbent’s Dilemma The Case of the
Auto Industry
CITATIONS READS
6 458
3 authors:
Naseem Akhtar
Jaguar Land Rover Limited
7 PUBLICATIONS 68 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
All content following this page was uploaded by Shaz Ansari on 16 July 2018.
CITATIONS READS
0 194
3 authors, including:
Some of the authors of this publication are also working on these related projects:
All content following this page was uploaded by Shaz Ansari on 29 April 2017.
Eden Yin
Judge Business School, University of Cambridge, Cambridge, UK
e.yin@jbs.cam.ac.uk
Shaz Ansari
Judge Business School, University of Cambridge, Cambridge, UK
s.ansari@jbs.cam.ac.uk
Naseem Akhtar
Jaguar Land Rover Limited, Coventry, UK
naseem@iname.com
Introduction
Radical innovations often upend incumbents firms and can even render them
obsolete (Ansari & Krop, 2012; Benner, 2010). Incumbents often have great
difficulties in addressing the challenge posed by radical innovations due to
inertia (Ghemawat, 1991), tendencies to exploit existing competences
(Levinthal & March, 1993; O’Reilly & Tushman, 2008), organizational rigidity
(Beonard-Barton, 1992), complacency and internal culture (Tellis, 2006),
inadequacies in the incentive system and resource allocation process
(Christensen, 1997), and gaps in organizational capabilities required for
embracing the innovation (Henderson, 2006; Tushman & Anderson, 1986).
However, a growing number of industries confront the threat of radical
innovations, responding to this them has become a strategic priority for many
incumbent firms.
Research shows that incumbents can survive or even prosper in the face of
radical innovations by forging effective partnerships with challenger firms
(Ansari & Krop, 2012), establishing a separate entity to fend off the threat
(Christensen, 1997; Christensen, Raynor & McDonald, 2015), better
evaluation and investment approaches (Hill & Rothaermel, 2003), appropriate
configuration of organizational form and structure (Ansari & Krop, 2012),
coupling basic and applied research functions (Hill & Rothaermel, 2003),
possessing downstream complementary assets critical for commercializing
the new technology (Ansari & Krop, 2012; Hill & Rothaermel, 2003), and a
high willingness to cannibalize their core business (Chandy and Tellis, 1998).
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
138
P ROFUTURO : F UTURE S TUDIES P ROGRAM
Scientific Editor: James Terence Coulter Wright
Evaluation: Double Blind Review, from SEER/OJS
Review: Grammatical, Normative and Layout
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017 139
E DEN YIN, SHAZ A NSARI AND NASEEM A KHTAR
In the face of paradigm shift, can the strategies or tactics for incumbents to
combat single radical innovation or firm be adequate to deal with this new
type of multi-faceted existential threat? If not, what should be the appropriate
strategies for them to survive or even thrive in the advent of a paradigm
shift? In this paper, we attempt to sketch out a research framework to
investigate this important issue.
Paradigm shift has become a popular word and a simple Google search
generated close to 7 million entries, much more than that for another popular
term “disruptive innovation”, (3 million entries). Yet, just like disruptive
innovation, paradigm while widely used has never been clearly defined. This
term was first coined by Kuhn (1962) in the context of scientific research,
meaning a fundamental change in the basic concepts and experimental
practices of a scientific discipline. Since the 1960s, it has also been used in
numerous non-scientific contexts to describe a profound change in a
fundamental model or perception of events. In the late 1990s, “paradigm
shift” became a buzzword especially with the rapid growth of high-tech
industries and web-based business in the U.S. and work from writers such as
Moore (1991).
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 - 148, JAN. / APR. 2017 140
E DEN YIN, SHAZ A NSARI AND NASEEM A KHTAR
Strategic Implications
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
141
RADICAL INNOVATION , P ARADIGM SHIFT AND INCUMBENT’S DILEMMA THE CASE OF THE A UTO INDUSTRY
scenarios but committing to more than one path forward is highly resource
demanding. So, the first dilemma for them is: should they strategically focus
on one scenario or invest in multiple scenarios? Single scenario focus enables
them to be fast and efficient in undertaking a radical transformation but also
risks them being left out if making the wrong choice. However, investing
multiple scenarios will spread their resources too thin to be effective in
successfully executing any of the chosen options.
Second, paradigm shift takes time as entrants would need to stitch their own
ecosystems often from scratch (Brandenburger & Nalebuff, 1996; Teece,
1986). In this process, a dominant design often needs to emerge (Utterback,
1994; Suarez, 2004), to enable the efficient establishment of a new
ecosystem through standardizations and build-up of the supplier network for
complementary products and services. Incumbents would need to act swiftly
but moving too fast also carries its own risks. It may be safer to let others to
first experiment with radical innovations, as the probability of success
increases due to learning effects (Peters and Waterman, 1982). However,
acting too slowly, may render the incumbent’s business obsolete through the
advent of a new paradigm.
Third, paradigm shift requires the coordinated efforts of the entire ecosystem
as firms do not operate in isolation but as part of a tightly knitted system
(Wareham, Fox & Giner, 2014). Due to the interdependence among all
members of the value network, incumbents would need to mobilize them to
collectively migrate into the new paradigm. However, many of the value chain
members are also competitors to each other. How to work with one’s enemy
to achieve a common goal? In other words, where and how much to cooperate
and compete with one’s rivals? To achieve effective coordination and
collaboration, one would need to share more information and resources, yet
by doing so, an incumbent firm may make itself more vulnerable. This is a
classic dilemma that firms encounter in a coopetitive situation
(Brandenburger & Nalebuff, 1996). Without an efficient and effective
coordination mechanism allowing the value chain members to achieve an
optimal level of coopetition, existing paradigm will lock itself into the chicken-
and-egg problem and await total disruption.
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
142
E DEN YIN, SHAZ A NSARI AND NASEEM A KHTAR
Fourth, disruptors when constructing their own value networks may also
include ecosystem incumbents to succeed (Eisenmann, Parker & Van Alstyne,
2006), as they may need the support of the very incumbents whom they want
to disrupt (Ansari, Garud, & Kumaraswamy, 2015). The key question for
incumbent firms is how much to accept or resist and even retaliate these
disruptors (Markman and Waldron, 2014). Accepting the invite allows
incumbent firms to quickly immerse themselves into the new paradigm and
possibly make the transition more naturally, yet it may also help disruptors
expedite their disruptive efforts against the entire existing paradigm and
ecosystem. It is again a rather delicate situation for incumbents to deal with.
Behind each of these major disruptive technology trends, there exists a large
number of diverse radical innovations in product, technology and business
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
143
RADICAL INNOVATION , P ARADIGM SHIFT AND INCUMBENT’S DILEMMA THE CASE OF THE A UTO INDUSTRY
models led by firms primarily from different and even remote industries, such
as Google, possibly Apple and Amazon as well (autonomous driving), Tesla,
and BYD (electrification), Uber, Lyft, Didi Kuaidi, Zipcar and alike (individual
or shared mobility). These entrants and their radical innovations are attacking
the auto industry from multiple fronts and very likely to uproot the entire
industry as they are turning a car into more of consumer electronics, or more
precisely a mobile computer on the road, e.g., the merger of autobahn and
infobahn (Seidel, Loch, & Chahil, 2005), which has the potential to be a hub
for human being’s intelligent life or a platform consolidating all essential
services in modern life. Besides radically redefining the car categories, these
disruptors are also redefining the very meaning of transportation and moving
the entire human society towards a personalized mobility service era. In
many ways, the auto industry’s paradigm shift is not just the shift from ICE
one into an electric one or autonomous one, but multiple paradigm shifts
occurring at different levels with varying magnitude within the auto industry.
Moreover, these forces will reinforce and accelerate one another, and the
convergence of disruptive technology-driven trends will likely transform the
auto industry (McKinsey report, 2016), and induce a massive paradigm shift
at a rapid pace. In the new paradigm, new ecosystems can emerge. OEMs
and other players could cooperate using the same (software) platform to
aggregate driver data and provide application programming interfaces to
third-party developers to offer additional services, very similar to the PC
industry (McKinsey report, 2015).
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
144
E DEN YIN, SHAZ A NSARI AND NASEEM A KHTAR
players will have to move into high- or ultra-high end segments of the market
or the mobility service, in particular, the seamless multimodal transportation
service (Deloitte, 2015).
For a high-end car maker such as Jaguar Land Rover, the first and foremost
task is to pursue the enhancement and development of capabilities needed
for a vastly different future. In other words, what core competence JLR would
need to obtain? How should JLR develop software capabilities? How to develop
a service capability if entering mobility service is inevitable? In a more
turbulent future, rapid responsiveness is a critical organizational competence
to have, but how should JLR develop it? Organizational competence is largely
shaped by the need to provide desired value propositions for the target
customers, but what would be the future value propositions for JLR’s
customers? What can be a meaningful differentiation for JLR brand?
Moreover, what business model should be designed to give JLR the flexibility
to work with alternative future scenarios? What kind of organizational profile
should JLR have in better preparing for the radical paradigm shift? Research
indicates that OEMs will likely need to push an end-to-end digitalization of
their organizations and build up skills for software development to fulfil new
requirements. (McKinsey & Company, 2015). How should JLR digitalize itself
and then provides customers with a digitalized total brand experience? As JLR
is much smaller than its key competitors, such as Audi, pursuing all
innovation in house appears to be infeasible. So, how should JLR work with
external technology companies, especially small firms and start-ups in
emerging technology areas and software development? Most importantly,
existing ecosystems within the auto industry may dissolve and new ones
gradually take shape. How should JLR develop a vibrant ecosystem such as
by owning its own platform or by become a key member of it?
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
145
RADICAL INNOVATION , P ARADIGM SHIFT AND INCUMBENT’S DILEMMA THE CASE OF THE A UTO INDUSTRY
References
Ansari, S., Garud, R., & Kumaraswamy, A. (2015). The disruptor’s dilemma:
TiVo and the U.S. television ecosystem. Strategic Management Journal,
37(9), 1829-1853.
Ansari, S., & Krop, P. (2012). Incumbent performance in the face of a radical
innovation: towards a framework for incumbent challenger dynamics.
Research Policy, 41, 1357-1374.
Baldwin, C., & von Hippel, E. (2011). Modeling a paradigm shift: from
producer innovation to user and open collaborative innovation. Organization
Science, 22(6), 1399-1417.
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
146
E DEN YIN, SHAZ A NSARI AND NASEEM A KHTAR
Deloitte Consulting LLP. (2016). The future of mobility. White Paper, Deloitte
University Press.
Eisenmann, T., Parker, G., & Van Alstyne, M. (2006). Strategies for two-sided
markets. Harvard Business Review, 84(10), 92-101.
Markman, G.D., & Waldron, T.L. (2014). Small entrants and large
incumbents: a framework of micro entry. Academy of Management
Perspectives, 28(2), 179-197.
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
147
RADICAL INNOVATION , P ARADIGM SHIFT AND INCUMBENT’S DILEMMA THE CASE OF THE A UTO INDUSTRY
Peters, T.J., & Waterman, R.H. (1982). In search of excellence, New York:
Harper & Row.
Seidel, M., Loch, C. H., & Chahil, S. (2005). Quo Vadis, automotive industry?
A vision of possible industry transformations. European Management Journal,
23(4), 439-449.
Wareham, J., Fox, P., & Giner, J. (2014). Technology ecosystem governance.
Organization Science, 25(4), 1195-1215.
F UTURE S TUDIES RESEARCH J OURNAL ISSN 2175-5825 S ÃO PAULO, V .9, N .1, P . 138 – 148, JAN . / A PR. 2017
148
View publication stats